Hecla signs processing pact with NGM

Hecla signs processing pact with NGM

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Hecla Mining Co. announced with its first-quarter results that it had reached an agreement with Nevada Gold Mines for processing bulk sampling of carbonaceous ore from Hecla’s Fire Creek Mine. The mine, which is primarily in Lander County, is about 63 miles west of Elko, overlooking Crescent Valley.

“We’re starting the sampling right away,” said Luke Russell, vice president of external affairs.

Mining will continue through the year at Fire Creek, and the processing of the 30,000-ton bulk sample will go into 2021 while Hecla refines the economics of the Fire Creek operation, he said in a phone interview.

Lauren Roberts, senior vice president and chief operating officer, said in Hecla’s earnings teleconference that “the Nevada Gold Mines’ processing facilities are larger scale plants with lower unit processing costs than in our Midas mill, and they’re closer as well, a double economic benefit.”

He said the agreement with NGM “is a low risk way to explore options to reduce Fire Creek’s cost structure because we expect bulk sampling to be self-funding, and we can stop the work at any time, if this proves not to be the case.”

Roberts said the bulk test of Fire Creek ore also may “provide a path to realizing value from the existing approximately 543,000-ton inferred resource, which grades about a half ounce per ton of gold and about a half ounce per ton of silver.”

Hecla President and Chief Executive Officer Phillips S. Baker Jr. said in the earnings report that “Nevada operations have performed well and have taken a step forward with a third-party processing agreement for a bulk sample of refractory ore and positive results from the hydrological study, which could result in continuing production through the end of the year and beyond.”

Russell said Hecla has 112 employees in Nevada.

Hecla’s Fire Creek underground mine is one of the properties the company acquired from Klondex Mines Ltd. The Hollister Mine, which is about 45 miles northwest of Elko, in Elko County, is in not in production, but Hecla said the Hatter Graben deposit at the Hollister property has the potential to be a 1 million-ounce orebody.

Hecla owns the Midas underground mine, also, and the Midas mill in Elko County, as well as the Aurora property in Mineral County.

Mining ended at Midas in the fourth quarter of 2019, but the mill is processing ore through the second quarter or into the third quarter, he said. Midas is processing oxide ore from Fire Creek.

“The focus is on exploration at Midas,” Russell said.

Midas is about 18 miles northwest of the Hollister Mine.

Nevada operations continued during the COVID-19 pandemic. Coeur d’Alene, Idaho-based Hecla stated in its first-quarter report that there were no known cases of the coronavirus at any of its sites as of May 7.

The Casa Berardi Mine in Quebec shut down March 23 due to a government-mandated coronavirus shutdown but went back into partial production April 16. The mine was expected to reach full production by mid-May.

Hecla’s San Sebastian Mine in Mexico suspended operations in late March due to the coronavirus shutdown ordered by the government of Mexico. The shutdown was extended to May 30, although it could be relaxed earlier in areas with few cases. Hecla said the closure was not expected to have a material impact on the mine’s full-year production “as long as the mine restarts operations in the second quarter because of a planned partial year of production.”

“Our rapid and early response to COVID-19 protected our workers, operations and the communities in which we operate,” Baker said in the earnings report. “With our key mines operational, we expect the second half to be strong as Casa Berardi resumes normal operations, Lucky Friday ramps up to full production and Greens Creek continues to deliver.”

The Lucky Friday Mine in Idaho was shut down during a strike that ended in January. Greens Creek is in Alaska.

Hecla reported companywide silver production of 3.25 million ounces and gold production of 58,792 ounces in the first quarter, compared with 2.92 million silver ounces and 60,021 gold ounces in the 2019 quarter. The company produced 5,893 tons of lead, up from 4,784 tons last year, and 12,847 tons of zinc, down from 13,944 tons in the 2019 quarter.

The company posted a net loss of nearly $17.19 million, or 3 cents per share, for the first quarter, compared with a loss of $25.53 million In the first quarter of 2019.

Hecla stated the reasons for the 2020 quarter loss included a drop in revenue due to lower provisional prices for a Greens Creek shipment, higher treatment charges, higher product inventory and the COVID-19-related loss of production at Casa Berardi.

Other earnings impacts included higher ramp-up and suspension costs related to Lucky Friday and the Midas and Hollister mines and Aurora mill, according to the report.

“While our financial position is strong, with over $200 million in cash at quarter end, no near-term debt maturities and no large capital projects planned for the next several years, we are reducing 2020 capital and exploration expenditures by 25%,” Baker said.

“We also continue to protect our revenues with put options on silver and gold that set the floor price but don’t limit upside participation and forward sales of our lead and zinc production,” he said.

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